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Expensive IT fails UK financial services industry (450)

by Janice McGinn

The UK financial services industry is spending more on IT than ever before, but the rate and costs of failure are accelerating. According to the 1997 Price Waterhouse annual survey of the financial services industry, 63 percent of senior IT executives say that IT budgets are on the up - double last year?s figure - but the success rate of IT projects continues to decline.

They fail to deliver within time and budget, and Alan Johnson, Price Waterhouse? financial services partner, said: ?There has been a surprising increase in the failure rate of IT projects in recent years, despite new tools and techniques and additional resources. However, there has been a greater effort to integrate IT more fully into the business strategy.?

Overall, average IT expenditure represents about 17 percent of total costs, rising to 25 per cent in investment banking. Just under 50 percent of respondents expect to see increased expenditure in systems development, previously a neglected area with far lower investment predictions.

Despite increased expenditure, those institutions reporting less than a 25 percent success rate has more than doubled since the 1994 Price Waterhouse survey. Overall, 25 per cent reported a success rate below 50 per cent.

New pressures are emerging as business and culture change. Johnson explained: ?The pressures of IT are set to grow significantly, created by more demanding users and the imminent double trouble of Year 2000 and EMU. The fixed nature of timescales and the far-reaching consequences of changes will turn the screw even tighter.?

One reason for the growth in expenditure is the increase in staff numbers, and over 50 per cent of respondents expect major growth for the first time in seven years. Skills shortages are a real problem, and the changing skills set is a new entry into the executives? top five issues.

Similarly, the problems of Year 2000 and EMU are far from resolved, with only a third claiming to be fully prepared for the Millennium and a negligible 3 percent ready for EMU.

The Internet has made few inroads since this time last year with just under 40 percent claiming to be using it, and in the investment banking sector, 50 percent say they have no intention of being Webified. Intranets are more popular, with 33 percent using at least one, and a further 14 percent intending to install one before the year-end.

Johnson again: ?Intranets are fast becoming the IT architecture, moving IT on from client-server. Primary usage is in the area of internal communications, probably to enable better access to information and in growing prefeernce to massive hard-copy presentation.?

The major barriers to intranets are those cited aginst the Internet - insufficient resources, integration with existing systems and security issues.